Individual Chapter 7 Bankruptcy

Although technically individual can file bankruptcy under chapter 11 but those figures are rare. Individuals normally file bankruptcy under chapter 7 or chapter 13 (a “reorganization”, or debt adjustment case).


In case of chapter 7 bankruptcy individual is allowed to keep certain properties exempted. The value of property that can be claimed as exempt varies from state to state.

Other assets, if any, are liquidated or sold by the trustee appointed by the court to repay creditors. There are 19 (as of 2005) general classes of debt that are not discharged in a Chapter 7.

Common exceptions to discharge include child support, most taxes, most student loans (unless the debtor prevails in a difficult-to-win adversary proceeding brought to determinate the dischargeability of the student loan), and fines and restitution imposed by a court for any crimes committed by the debtor. One of the greatest disadvantages of filing bankruptcy can be seen on credit report. It stays there for 10 years. This may have a negative effect on credit rating. Consumer credit and creditworthiness is a complex subject, however. Future ability to obtain credit is dependent on multiple factors and difficult to predict.